Pros and cons of renting out land for solar up north
Large scale solar farms have been a rare sight in the English countryside but interest is now beginning to spread rapidly from the south coast up to the Midlands and North of England. Jayne Carrick of gfw-Renewables has been looking at the pros and cons for northern farmers.
Many farmers in the midlands and north of England are now reporting visits by solar farm developers anxious to sign them up for land rental in order to build solar farms. It can be tempting to jump in and sign, but to realise the true value of the site farmers need to weigh up the options carefully first.
1. Assessing the Value
The value of a potential site for development of large scale PV is calculated by assessing the income available from generation of electrical energy versus the development costs.
Developers who have previously focussed on the south coast, where income is predicated to be higher due to longer daylight hours, are now approaching farmers in northern counties for development sites, as costs increase with scarcity of suitable sites and grid capacity in the south.
Understanding in advance what a developer is looking for means the landowner can take control and look at adding value to the site before talking to developers, making negotiating a great deal more productive:
– Check there is access to the three-phase electrical grid and investigate distance to the nearest substation
– Identify the best south-facing or flat field/s (4-6 acres per MW depending on topography)
– Having ground that is not too rocky so foundations can be driven in rather than drilled is an advantage
– Willingness to install security if site is urban fringe or away from farm/fencing/CCTV
Due to the dwindling grid capacity in some areas, a good place to start is grid connection. Rural electricity networks are fairly sparse and tend to be mainly single phase connections, so those fortunate land owners with a three-phase connection, which could facilitate bigger connections, are more valuable. Landowners with sites where a substation is located tend to be the most highly valued, as the potential for a large connection could be highest.
2. When to sign up
Signing up with a developer straight away does mean the landowner has no “up-front” costs, but puts the landowner in the developer’s hands for up to two years. The site could go to the bottom of a long queue of potential sites and, if the returns are not as good as for other farms, then the developer will turn his attention elsewhere and the landowner is trapped in a contract which stops him or her from talking to others.
The key to this is to negotiate the contract. The landowner can request a six-month tie-in rather than 12 or 24 months and/or an upfront payment. Terms such as stepped increases in rental or a percentage of the profits can also be considered. An asset such as a substation can be dealt with under a separate agreement or to put the landowner’s site at the head of the queue.
A better lease deal may be negotiated with the provision of more accurate information on potential costs, to reduce the risks for the developer. A landowner could obtain a formal offer of grid connection and planning consent to provide a “shovel-ready” site. This route results in some of the risk being transferred from the developer to the landowner, but is worth considering for those keen landowners, who do not want to sign over control of the speed of the development.
3. Deal Options
Straightforward leaseholds are available on a £/acre basis, but it is also possible to look at a “stepped” rental whereby an increase in profits is shared, as the initial investment cost is paid off. Similarly, joint enterprises are popular, sharing the financial investment and the risk.
Self-developing is also an option; although returns on PV systems are not as exceptional as they once were, a return of 9-12% is achievable and planning consent can be relatively straight forward. Many farms now have commercial-scale, roof-mounted, and occasional ground-mounted arrays in place, giving them a reliable source of electricity during daylight hours for 30 years plus. High on-site usage provides the most attractive returns so if the client raises broiler poultry or has a dairy, holiday cottages or workshops, the benefits are greater.
For more information and advice go to www.gfwrenewables.com
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Large scale solar farms have been a rare sight in the English countryside but interest is now beginning to spread rapidly from the south coast up to the midlands and north of England. Jayne Carrick of gfw-Renewables has been looking at the pros and cons for northern farmers.
Many farmers in the midlands and north of England are now reporting visits by solar farm developers anxious to sign them up for land rental in order to build solar farms. It can be tempting to jump in and sign, but to realise the true value of the site farmers need to weigh up the options carefully first.
1. Assessing the Value
The value of a potential site for development of large scale PV is calculated by assessing the income available from generation of electrical energy versus the development costs.
Developers who have previously focussed on the south coast, where income is predicated to be higher due to longer daylight hours, are now approaching farmers in northern counties for development sites, as costs increase with scarcity of suitable sites and grid capacity in the south.
Understanding in advance what a developer is looking for means the landowner can take control and look at adding value to the site before talking to developers, making negotiating a great deal more productive:
❚ Check there is access to the three-phase electrical grid and investigate distance to the nearest substation
❚ Identify the best south-facing or flat field/s (4-6 acres per MW depending on topography)
❚ Having ground that is not too rocky so foundations can be driven in rather than drilled is an advantage
❚ Willingness to install security if site is urban fringe or away from farm/fencing/CCTV
Due to the dwindling grid capacity in some areas, a good place to start is grid connection. Rural electricity networks are fairly sparse and tend to be mainly single phase connections, so those fortunate land owners with a three-phase connection, which could facilitate bigger connections, are more valuable.
Landowners with sites where a substation is located tend to be the most highly valued, as the potential for a large connection could be highest.
2. When to sign up
Signing up with a developer straight away does mean the landowner has no “up-front” costs, but puts the landowner in the developer’s hands for up to two years.
The site could go to the bottom of a long queue of potential sites and, if the returns are not as good as for other farms, then the developer will turn his attention elsewhere and the landowner is trapped in a contract which stops him or her from talking to others.
The key to this is to negotiate the contract. The landowner can request a six-month tie-in rather than 12 or 24 months and/or an upfront payment. Terms such as stepped increases in rental or a percentage of the profits can also be considered.
An asset such as a substation can be dealt with under a separate agreement or to put the landowner’s site at the head of the queue.
A better lease deal may be negotiated with the provision of more accurate information on potential costs, to reduce the risks for the developer.
A landowner could obtain a formal offer of grid connection and planning consent to provide a “shovel-ready” site.
This route results in some of the risk being transferred from the developer to the landowner, but is worth considering for those keen landowners, who do not want to sign over control of the speed of the development.
3. Deal Options
Straightforward leaseholds are available on a £/acre basis, but it is also possible to look at a “stepped” rental whereby an increase in profits is shared, as the initial investment cost is paid off. Similarly, joint enterprises are popular, sharing the financial investment and the risk.
Self-developing is also an option; although returns on PV systems are not as exceptional as they once were, a return of 9-12% is achievable and planning consent can be relatively straight forward.
Many farms now have commercial-scale, roof-mounted, and occasional ground-mounted arrays in place, giving them a reliable source of electricity during daylight hours for 30 years plus.
High on-site usage provides the most attractive returns so if the client raises broiler poultry or has a dairy, holiday cottages or workshops, the benefits are greater.